Man Without Qualities

Saturday, February 08, 2003

Consumer Debt?

Reuters reports:

U.S. consumers, saddled with huge debt loads, are poised to face even tougher times with more layoffs, rising oil prices and a looming U.S. war with Iraq, credit rating and asset-backed securities analysts said this week. ... Late loan payments and defaults have been climbing. Personal bankruptcy filings are expected to surpass last year's record. "Our outlook (for consumer credit) is absolutely bleak," said Jeff Salmon, head of asset-backed securities research at Barclays Capital.

But the Wall Street Journal reports:

Americans unexpectedly pared down their outstanding borrowing in December at the fastest pace in more than 10 years. .... [T]he Fed said outstanding balances of consumer borrowing, which includes car and credit-card loans among other forms of installment debt, fell $4 billion overall, or by an annual rate of 2.75%, to $1.722 trillion in December. The last time Americans cut their debt at a faster annual pace was in April 1992, when consumer credit declined by 3%, the Fed said. In dollar terms, the drop was the biggest since a $5.825 billion slide in December 1990. Economists were way off. They had predicted credit would increase by $4.3 billion in December, according to a survey by Thomson Global Markets. ... [T]he drops in November and December mark the first back-to-back declines in consumer credit since May and June of 1992, when the economy was still shaking off the effects of recession, the Fed said.

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